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· increase the stamp duty first home owner concession from the first $225 000 of a property’s value to the first $350 000 of a property’s value, from 1 May 2007;
· abolish stamp duty on hiring arrangements;
· abolish stamp duty on the grant of a lease for nil or nominal consideration;
· exempt all types of guarantees from nominal stamp duty of $20;
· ensure that anything that is physically fixed to land is regarded as “land” for the purposes of the land holder provisions;
· clarify that stamp duty is imposed on the full value and best use of the land, which includes having regard to information that enhances the value of the land;
· ensure the consistent stamp duty treatment of mining information irrespective of whether the mine is subject to the Mining Act;
· put in place a revenue protection measure, effective 1 May 2007, to prevent the corporate reconstruction exemptions being utilised where a purpose (collateral or otherwise) is to frustrate the recovery of stamp duty, tax or royalty that is payable to the Territory; and
· ensure that a person who has previously owned a home interstate under a long-term lease cannot qualify for the stamp duty first home owner concession for a subsequent home purchase.
The First Home Owner Grant Act is amended to:
· clarify that consideration needs to actually have been paid for the purchase of a home prior to an applicant receiving the first home owner grant; and
· clarify that the amount of a first home owner grant overpaid to an otherwise eligible grant recipient can be recovered.
Other amendments have been made to improve the interpretation of the Acts being amended or to incorporate contemporary legislative drafting styles.
NOTES ON CLAUSES
PART 1 – PRELIMINARY
Clause 1. Short title
This is a formal clause which provides for the citation of the Bill. When passed, the Bill may be cited as the Revenue (Budget Initiatives) Amendment Act 2007.
Clause 2. Commencement
This clause provides for various Parts of the Bill commencing at different times.
Subclause (1) provides that Part 2, Division 2 of the Bill (relating to the increase in the stamp duty first home owner concession to the first $350 000 of a property’s value) and Part 3, Division 2 (relating to the measure to prevent the corporate reconstruction exemptions applying if the reconstruction will result in Territory tax or royalty debts being avoided) commence on 1 May 2007.
Subclause (2) provides that the remainder of the Bill commences on 1 July 2007.
PART 2 – AMENDMENT OF STAMP DUTY ACT
Clause 3. Act amended
The Act being amended by this Part is the Stamp Duty Act.
Division 1 – Abolition of duty on hiring arrangements
Clause 4. Amendment of Schedule 1
This clause omits items 9 and 9A of Schedule 1 to the Stamp Duty Act as part of the abolition of stamp duty on hiring arrangements. Item 9 and 9A previously set out the rate of stamp duty imposed on hiring arrangements.
Division 2 – Increase in first home owner concession
Clause 5. Amendment of section 8B (Concession for first home owners)
This clause replaces paragraph (b) of the definition of “first home owner concession” in section 8B(1) of the Stamp Duty Act with a new paragraph (b), to increase the amount of the stamp duty first home owner concession from the first $225 000 of a property’s value to the first $350 000.
This represents an increase in the maximum concession to $15 312.50 from a previous maximum of $8 015.60.
Clause 6. Repeal and substitution of Part 4
This clause repeals Part 4 of the Stamp Duty Act and inserts a new Part 4, consisting of new sections 10, 11 and 12. The repealed Part 4 contained transitional provisions relating to the application of amendments made by the Stamp Duty Amendment Act 2005.
New section 10 of the Stamp Duty Act provides definitions relating to new Part 4, to more easily refer to the amendments made by this Bill and the transitional provisions relating to the Stamp Duty Amendment Act 2005.
New section 11 of the Stamp Duty Act ensures that the provisions in repealed Part 4 of the Stamp Duty Act, which deals with transitional matters for the Stamp Duty Amendment Act 2005, continue in force where relevant.
New section 12(1) of the Stamp Duty Act provides that, subject to new section 12(2), the increased first home owner concession will only apply to a conveyance first executed on or after 1 May 2007.
New section 12(2) of the Stamp Duty Act ensures that the increased first home owner concession will not apply to a conveyance executed on or after 1 May 2007 where:
· it replaces a conveyance executed before 1 May 2007 for the same or substantially similar land;
· the conveyee entered into a contract or had an option, granted before 1 May 2007, to purchase the land or substantially similar land; or
· the conveyor had an option, granted before 1 May 2007, to require the conveyee to purchase the land or substantially similar land.
The reference to substantially similar land is necessary to cover situations such as where a person rescinds a contract and buys a similar apartment in the same complex to take advantage of the increased first home owner concession.
Division 3 – Further amendment related to first home owner concession
Clause 7. Amendment of section 8B (Concession for first home owners)
This clause amends the definition of “relevant interest” in section 8B(1) of the Stamp Duty Act so that it includes long-term leases granted by other states or territories. This will ensure that a person who has previously owned a home interstate under a long-term lease cannot qualify for the stamp duty first home owner concession for a subsequent home purchase.
This will align the treatment of prior home ownership under long-term Crown leases granted by the Northern Territory or the Australian Government with such leases granted by other states or territories.
This treatment of a relevant interest was always intended and is consistent with the treatment of a relevant interest under the First Home Owner Grant Act.
Division 4 – Abolition of duty on certain instruments
Clause 8. Amendment of Schedule 1
Subclause (1) makes a consequential amendment to item 6 of Schedule 1 to the Stamp Duty Act that arises as a result of the insertion of new item 39 of Schedule 2 to the Stamp Duty Act. New item 39 exempts all types of guarantees from nominal stamp duty (see clause 9 below).
Subclause (2) amends item 12(5) of Schedule 1 to the Stamp Duty Act to provide for the abolition of stamp duty on the grant of a lease for either no or nominal consideration. This follows on from the abolition of stamp duty on rent paid for the grant and renewal of leases, which occurred on 1 July 2006.
Clause 9. Amendment of Schedule 2
This clause amends item 38 of Schedule 2 to the Stamp Duty Act to improve its comprehension. The amendment clarifies that an instrument that secures the payment or repayment of money, such as a mortgage, is exempt from stamp duty unless the instrument also provides for another matter that is liable to ad valorem duty.
This clause also inserts a new item 39 into Schedule 2 to the Stamp Duty Act to exempt all types of guarantees in the form of a deed from nominal stamp duty. The exemption also applies to indemnities in the form of a deed, as these types of documents are akin to guarantees. The exemption will not apply if the deed also provides for another matter that is liable to ad valorem duty.
This amendment ensures the consistent stamp duty treatment of all types of guarantees.
PART 3 –AMENDMENT OF TAXATION (ADMINISTRATION) ACT
Clause 10. Act amended
The Act being amended by this Part is the Taxation (Administration) Act.
Division 1 – Abolition of duty on hiring arrangements
Clause 11. Amendment of section 4 (Interpretation)
Subclause (1) removes the definitions of "hire-purchase agreement", "hiring arrangement", “lender”, “registered lender” and “user” from section 4(1) of the Taxation (Administration) Act. These definitions are no longer necessary as a result of the abolition of stamp duty on hiring arrangements.
Subclause (2) simplifies the definition of “return” in section 4(1) of the Taxation (Administration) Act by removing references to specific provisions in the Act requiring the lodgement of returns.
Subclause (3) removes section 4(2), (2A) and (2B) of the Taxation (Administration) Act. These sections are no longer necessary as a result of the abolition of stamp duty on hiring arrangements. These sections are linked to the definition of “hiring arrangement”, which is being omitted by subclause (1).
Clause 12. Amendment of section 57 (Owner to pay duty)
This clause makes a consequential amendment to section 57(2)(b) of the Taxation (Administration) Act as a result of the abolition of stamp duty on hiring arrangements.
Businesses that hire out motor vehicles, without the provision of a driver, will still be eligible for a reduction in stamp duty on a certificate of registration for a motor vehicle that has been available for hire or lease to the public where that vehicle has been kept in the Territory for less than 12 months.
Clause 13. Repeal of Part III, Division 13
This clause repeals Part III, Division 13 of the Taxation (Administration) Act to effect the abolition of stamp duty on hiring arrangements. That Division contained the bulk of the provisions relating to the imposition of stamp duty on hiring arrangements.
Clause 14. Amendment of section 123A (Regulatory offences)
This clause removes references to sections 71, 74, 75 and 76 from section 123A and is a consequential amendment arising from the abolition of stamp duty on hiring arrangements, in particular the repeal of Part III, Division 13 of the Taxation (Administration) Act.
Clause 15. Amendment of section 126 (Books, accounts etc.)
This clause makes consequential amendments to the record keeping requirements in section 126(1) of the Taxation (Administration) Act as a result of the abolition of stamp duty on hiring arrangements. It ensures that a person who was registered for hiring duty, prior to its abolition, is required to comply with the record keeping requirements of section 126(1), even though that person is no longer registered.
Clause 16. New Part XII
This clause inserts a new Part XII into the Taxation (Administration) Act, comprising new section 144.
New section 144(1) of the Taxation (Administration) Act provides definitions relating to new Part XII, to more easily refer to the amendments made by this Bill.
New section 144(2) of the Taxation (Administration) Act provides that the Taxation (Administration) Act as in force before 1 July 2007 continues to apply in relation to all instruments and transactions entered into before 1 July 2007. The exception to this is the amendments, which commence 1 May 2007, to ensure that a stamp duty corporate reconstruction exemption does not apply if it is used to avoid payment of Territory stamp duty, tax or royalty debts.
New section 144(3) of the Taxation (Administration) Act provides that lenders registered prior to 1 July 2007 are not required to lodge returns or pay duty for payments they receive after 1 July 2007, in respect of hiring arrangements entered into before that date.
Division 2 – Amendments relating to tax avoidance
Clause 17. Amendment of section 19 (Exemption: interposing new corporation between existing corporation and its shareholders)
This clause amends section 19(4) of the Taxation (Administration) Act to impose a further condition on the corporate reconstruction exemption regarding interposed corporations. From 1 May 2007, the corporate reconstruction exemption will not be available if the Commissioner of Taxes is of the opinion that the restructure is to avoid or frustrate the recovery of stamp duty, tax or royalty that is payable to the Territory.
Previously, the exemption condition was limited to where a corporate reconstruction was undertaken to avoid or reduce the stamp duty that would otherwise be payable on a conveyance.
Clause 18. Amendment of section 20 (Exemption: conveyances and transfers between group corporations)
This clause amends section 20(4) of the Taxation (Administration) Act to impose a further condition on the corporate reconstruction exemption regarding a conveyance of dutiable property or a transfer of a motor vehicle certificate of registration between group corporations, in the same manner as clause 17.
Clause 19. Amendment of section 4 (Interpretation)
Subclause (1) omits the definitions of “land” and “unencumbered value” in section 4 of the Taxation (Administration) Act.
Subclause (2) inserts new definitions for these terms and also inserts a definition of “mining tenement”.
The new definition of “land” is a consequential amendment as a result of the new definition of “mining tenement”.
The new definition of “mining tenement” encompasses both mining tenements under the Mining Act and other mines in the Territory. This ensures the consistent stamp duty treatment of mining information, irrespective of whether the mining is conducted on a mining tenement under the Mining Act. The new definition is used in the example for new section 4A(2)(c) of the Taxation (Administration) Act, as provided for in clause 20 of the Bill.
The new definition of “unencumbered value” in section 4(1) of the Taxation (Administration) Act acts to ‘signpost’ the location of that definition in section 4A of the Taxation (Administration) Act.
Clause 20. Amendment of section 4A (Unencumbered value – arrangements to affect stamp duty)
This clause replaces section 4A(1), (2) and (3) of the Taxation (Administration) Act with new section 4A(1), (2), (3), (3A) and (3B). As a result, subclause (1) provides for a change in the section heading.
Subclause (2) provides for the new subsections. New section 4A(1) is a restatement of the previous definition of “unencumbered value” in section 4(1) of the Taxation (Administration) Act.
New section 4A(2) provides further legislative guidance on how land is to be valued for stamp duty purposes. It clarifies that the best use and all the commercial advantages of the land, including information that enhances the value of the land, are taken into account when determining the unencumbered value of the land. It would be expected that a valuer would ordinarily have regard to these principles when valuing land.
New section 4A(2)(c) ensures that, when valuing land, it will be assumed a reasonable purchaser possesses knowledge of all existing information relating to the land. As a result, the value of the land will not be reduced by what may otherwise be the cost to reproduce or acquire this information.
When a taxpayer separately attributes a value to information that is relevant to the value of dutiable property, new section 4A(3) ensures that regard will be had to this in ascertaining the full value of the dutiable property. For instance, if separate amounts were attributed by a taxpayer to a mining tenement and to mining information, new section 4A(3) ensures that the value attributed to this information will be included in the value of the tenement. This is consistent with the “unencumbered value” of property equating to the “full value” of that property. This is also consistent with how mining information has been treated before these amendments.
New sections 4A(3A) and (3B) are also based on the existing definition of “unencumbered value” in section 4(1) of the Taxation (Administration) Act and the existing section 4A of the Taxation (Administration) Act. The policy in existing section 4A, in relation to disregarding an agreement or arrangement that has the effect of reducing the value of property, remains unchanged in new section 4A(3A).
Clause 21. Amendment of section 56C (Interpretation)
This clause inserts a definition of “land” into section 56C of the Taxation (Administration) Act to ensure that anything physically fixed to the land is considered to be land for the purposes of the land holder provisions.
The new definition of “land” in section 56C of the Taxation (Administration) Act should be read in conjunction with the exclusion for family farming land in section 56C(9) and the general definition of “land” in section 4(1), which clearly includes a fixture to land.
The intention of this new definition is to place the focus on whether the asset is physically fixed to the land rather than the common law test that is used to determine whether an asset is a fixture to the land. For example, this provision aims to overcome the argument that buildings that can be severed from the land and buildings that will eventually be removed from the land are not land for the purposes of the land holder provisions.
This treatment is consistent with that for the direct transfer of land and buildings (whether those buildings are fixed to the land or not), where such buildings are subject to stamp duty as either a fixture to the land or a chattel.
PART 4 – AMENDMENT OF FIRST HOME OWNER GRANT ACT
Clause 22. Act amended
The Act being amended by this Part is the First Home Owner Grant Act.
Clause 23. Amendment of section 18 (Amount of grant)
This clause amends section 18(a) of the First Home Owner Grant Act to clarify that, in order for an applicant to be eligible for the first home owner grant, consideration must actually have been paid for the purchase of the home. This will overcome cases in which a person can qualify for the grant by simply giving consideration for the purchase of a home but never actually paying for that home. This would most usually occur when parties to a transaction are not dealing with each other at arm’s length.
Clause 24. Amendment of section 41 (Power to recover amount paid in error)
This clause amends section 41 of the First Home Owner Grant Act by replacing sections 41(1) to (3B) with new sections 41(1) to (3) to clarify that an overpayment of a first home owner grant can be recovered.
While it is clear that first home owner grant applicants who are ineligible for the grant are required to repay the whole amount of the grant, it was not sufficiently clear that an overpayment to an applicant, who was otherwise eligible to receive the grant, could be recovered.
For example, if a person was paid the full $7000 grant but was only entitled to a grant of $5000, it will now be clear that the $2000 overpayment can be recovered. This is how the legislation was intended to operate.
In subclause (1), new section 41(1)(d) specifies that the recovery powers of the Commissioner of Taxes extend to such overpayments. There has been no other change to the circumstances when a person must repay the grant, namely, ineligibility for the grant, failing to comply with the residence requirements or breaching a condition imposed by the Commissioner.
New section 41(2)(c) requires the person to notify the Commissioner in writing and make a repayment within 30 days of the overpayment occurring. This is consistent with the other circumstances in which a default can occur.
New section 41(3) is a restatement of the previous sections 41(3), (3A) and (3B) of the First Home Owner Grant Act but it also ensures that interest and a penalty may apply to the amount of the overpayment.
Subclause (2) makes a consequential amendment to section 41(12) of the First Home Owner Grant Act as a result of new section 41(3).